Hyperloop One wants $250 million from the ‘Gang of Four’ that sued the start-up
Hyperloop Technologies Inc. is seeking at least $250 million in damages from four former high-ranking employees who the company says tried to incite rebellion within the Los Angeles start-up.
Now referring to itself as Hyperloop One, the firm says then-Chief Technology Officer Brogan BamBrogan and his fellow “conspirators” knew their days at the company “were numbered” because of poor performance or erratic and misogynistic behavior, according to documents submitted Tuesday in Los Angeles County Superior Court.
In an attempt at taking control before being shoved out the door, the group launched a failed coup attempt and then tried to form a competitor, the documents say. BamBrogan went as far as registering the Internet address hyperlooptoo.com.
Hyperloop One attorneys describe BamBrogan as being in a “Gang of Four” with William Mulholland, vice president of finance; Knut Sauer, vice president of business development; and assistant general counsel David Pendergast. They’re accused of breaching employment contracts, along with their duty of loyalty to the company.
The filing counters a lawsuit the four men brought against the company last week seeking to get their jobs back. They say Hyperloop One pushed them out after they complained about the firm’s top investors breaching their fiduciary duty. They asserted that investors’ friends and family had been overpaid for company work, including a public relations consultant whose salary was boosted while dating Executive Chairman Shervin Pishevar.
The company says those controversial decisions were justified. The PR firm, for one, charged the standard rate rather than a discounted one as it took on more responsibilities and Hyperloop One got more cash.
The dueling lawsuits accuse the rival sides of greed and spewing falsehoods — allegations that have left a sour mood among the more than 150 employees left at Hyperloop One’s gray brick headquarters in an industrial yard along the Los Angeles River.
The start-up is racing to develop a system for thrusting levitating pods of people and freight through tubes with minimum air resistance. No projects are set, but studies are underway about potential routes. For example, a report this month promoted by Hyperloop One suggests a $20-billion project could carry people through the Baltic Sea between Stockholm and Helsinki, Finland, or about 300 miles, in 28 minutes.
Most concrete is a goal to demonstrate a test system in the Nevada desert in December. Plans remain on track and the company is “stronger than ever,” said Orin Snyder, an attorney for the company who’s previously fended off or settled co-founder lawsuits against tech clients Facebook, Square and Yik Yak.
Chief Executive Rob Lloyd and other officials had grievances against each of the eventual plaintiffs, Snyder wrote. The group disputes the assertions, saying they never received negative evaluations.
Though Pishevar hand-picked BamBrogan as his top-choice co-founder, it turned out that the former SpaceX rocket engine designer was “below average,” the counter-suit states. When Lloyd arrived last fall, he stripped BamBrogan of engineering management. BamBrogan instead focused on attending conferences and talking to business partners. He had just four direct reports while the top engineer, Josh Giegel, led a team of 70.
BamBrogan still had problems though. He “repeatedly antagonized female partners, vendors, and employees” with “brazen sexism,” the counter-complaint says. He refused to work with at least one consultant who was a female. In another case, he screamed at a female colleague, punched a wall and then stormed outside “to loudly smash beer bottles in anger,” the court record says.
BamBrogan also allegedly didn’t safeguard the company’s intellectual property. He shared an idea with a corrugated box company that was a Hyperloop One supplier without signing a confidentiality agreement, and that vendor went on to to file a related patent, the filing says.
The company contends he showed up to the office drunk, with the scent of liquor on his breath, an allegation he denies.
Pendergast came across as rude during contract negotiations with business partners, the filing says. Adding to concerns, the company alleges that recent fundraising efforts appeared disorganized because of sloppiness on the part of Pendergast and Mulholland, who lacked experience dealing with investors abroad.
Sauer was “dismissive and unprofessional” in meetings with partners and consultants, and he charged $3,500 worth of flights for his children to the corporate credit card — enough to get on Lloyd’s bad side, according to the countersuit.
As management frustrations apparently festered, the group bonded over what it considered inappropriate behavior, including the nepotism and unfair treatment of employees, the suit said. They penned their concerns — with seven other colleagues in leadership roles — on the eve of Memorial Day weekend.
Chief among the desires was a power shift from Pishevar to themselves, the countersuit said. Under their plan, employee shareholders would have voting control. What attorneys for the company say was problematic was that the “gang” sought to make the company look bad externally to gain leverage internally.
Pendergast told investors throughout Asia that the company wouldn’t generate returns and BamBrogan attempted to spook investors in Russia, the company alleges. They tried to solicit other employees to join them on a rival venture, with BamBrogan offering to put up $250,000 in personal funds, the lawsuit adds. (BamBrogan said Tuesday he registered hyperlooptoo.com as a joke, prompted by another employee.)
By mid-June, the “conspirators” were asked to get on board or leave, the countersuit says. They left, though the company says it continued to pay BamBrogan and Mulholland until last week while trying to amicably close the door on the saga.
The company describes the lawsuit as a growing pain, though it’s one that could drag on. A hearing date hasn’t been set.
For workers, the so-called coup attempt is bringing some positive changes. Hyperloop One committed to setting aside 20% of the company’s stock for employees, up from 15%. It created two new board seats. And it has agreed to remove clawback provisions that allow the company to buy back shares unilaterally.
Twitter: @peard33
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UPDATES:
4:45 p.m.: This article was updated with additional information from the lawsuit and reporting.
This article was originally published at 11:55 a.m.
